By Priyanka Sachdeva, Market Analyst for Phillip Nova
Gold prices hovered over a six-month-high on the Monday evening session and managed to close above the key Strategic zone of $2010 per ounce. Bullion seems to have witnessed a stop loss short covering over the weekend and derived some additional support from a slight pullback in the Dollar Index against the basket of major currencies. Technically, the Comex Gold futures hovered over a six-month high on Tuesday morning after a sustained close over the key zone of $2000-2010 per ounce in the Monday session.
Technically, two closes above the zone will mark the bullish trend reversal by confirming the Reverse Head and Shoulder pattern. A plausible upswing from here on will target the previous highs of $2080 per ounce before breaching newer highs beyond $2200 per ounce. On the downside, last week’s low of $1965 per ounce will continue to extend the first layer of support for Bullion. Extending gains from the previous session as of 11:30 am Singapore Standard Time, the Gold Comex December futures was trading at $2015.60 per ounce slightly up by +0.16%.
The upcoming key US inflation gauge on Thursday might add impetus to a possible end of FED’s tightening cycle which will likely bode well for the non-yielding Dollar-denominated Gold. The rally for the yellow metal has been predominantly subdued by the strength of the US Dollar on the back of the “higher for longer FED rate” narrative throughout 2023. A mellowed inflation print will open doors to rate cuts later in 2024 which can brighten the appeal of investing in Gold.
The US rate outlook and FED commentary following this week’s inflation print will be the key driver for Gold prices going forward. Fed Watch Tool currently reflects that markets are pricing in a 22% chance that the Fed’s policy rate will remain unchanged at 5.25%-5.5% by June next year. So if Powell’s speech pushes back the projections of rate cuts by mid-next year, the bullish momentum is Gold’s rally will be challenged further. The signs of a deteriorating global economy are expected to increase the demand for gold as a safe haven. However, since most major central banks have indicated that interest rates will remain high for a longer period, the future of the yellow metal is still uncertain.
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